June 01, 2022

Why serverless changes everything in tech economics

The popularity of cloud computing means that by extension, anyone familiar with the concept is likely also familiar with serverless computing. It’s been around since 2008 when Google rolled out a version of what we know as serverless today with App Engine, but it wasn’t until 2014 that Amazon widely popularized Function-as-a-Service with AWS Lambda. Since then, competing options have entered the scene, and it’s now an integral part of understanding what the cloud can do for businesses.

The technical achievement of serverless is well-understood by now, as well as the convenience factor provided to users. Because of the versatility it brings to the table, it can be implemented for a variety of use cases, at almost any scale. But this is something pretty much everyone accepts and understands by now. So this isn’t a piece singing the praises of serverless’s technical usability. Instead, we’ll focus on another area of benefit that’s just as important and arguably draws more value from the model: the economics.

“Pay as you go” is a string of words some might be getting weary of, with how much they come up in relation to the cloud. But it’s definitely a model worth talking about. The servers of the past required a certain capital expenditure, a fixed overhead that you’d pay for regardless of knowing exactly how much you’d use. Likely, you’d over-estimate just a little bit, so as not to be left without options in the case of needing more. Then the cloud completely left this process in the past with virtual servers that were elastic, able to be scaled up and down at a moment’s notice. This helped make server cost variable—you could really optimize your spending based on exactly what was needed.


Serverless takes this idea and goes several steps further with it.

Rather than renting out virtual servers such as AWS EC2’s, increasing or decreasing the amount scaled to your demand, the idea of serverless tightens up the “pay as you go idea” even more. This is where the FaaS model comes into play. A serverless service like AWS Lambda charges only for code that’s running. The cost counts per function request and measures the duration of code running. This level of cost streamlining makes even the previous model seem fixed.

This results in a system of unit economics that scale with demand, which is a much more efficient investment than the old world. This model is further helped by AWS's elasticity and auto-scaling, causing less waste with faster development. It's predictable too; gone are the days of overpaying for what isn't necessary to use. It's all flexible to exactly what's needed and not more.

This kind of cost-saving pairs perfectly with the current state of the business environment post-pandemic. With distributed workforces and remote working becoming more of a norm rather than a niche option, cloud computing is quickly becoming a norm as well, and the benefit serverless provides to the technology cost of a business is far too significant to be ignored. With remote working, companies are able to save massively on expenses such as office space, allowing these savings to go directly into better margins, and using an FaaS model on the tech side with a serverless cloud provider pushes this even further. A combination of serverless computing and other cloud computing options at every level of the stack, being utilized by a cost-smart, remote-first business making full use of every piece of technology at their disposal is something to aspire towards.

Combining the clear cost benefit of serverless with the world of convenience they provide allows for a much more focused business and technical vision. Lower server allows finances to be allocated towards other factors that can directly contribute to creating value, and quick deploys, lower latency, and no need for server management can allow for that value to be presented to end users faster and at a higher quality. With what serverless makes possible, it’s clear to see that the businesses that choose to evolve at the same rate as the advancement of technology will be those that end up on top.


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